The Chinese real estate investors of today is looking to buy property in overseas markets away from his homeland. Why is this? What is behind this drive and interest in real estate trade shows with exhibitors from faraway lands? For some time now, the Chinese government has been trying to keep the country from a domestic property bubble and these efforts to curb such a situation continue to have an effect on the Chinese real estate investors. Their drive to buy overseas comes from a desire to protect their wealth and to also possibly find a home in a new land—one with a more stable environment and maybe a little cleaner air.
From around 2007, China has experienced a sharp rise in economic prosperity. The rise was so prosperous that late in 2012 there were over a one million millionaires. The result is a socioeconomic class where the patriarchs are in their early-to-middle 40s with time to enjoy leisure activities. This is something that has never been a reality before. Furthermore, some are looking to immigrate to new lands or send their children to schools outside of China.
Chinese The Driving Force Today
For many in this new wealthy class, their net worth was given a boost by the rise in domestic real estate values. This is changing as the current economic and political winds have shifted and are blowing the opposite way. Volatility in the Chinese domestic real estate market is the overriding theme today thus causing these new millionaires to look for stability overseas.
The Chinese government, in order to prevent a domestic property bubble, implemented various restrictions and regulations. These moves included measures such as requiring higher down payments, limiting the ownership of multiple properties, and increasing property taxes. Investors’ concerns about these restrictive policies also make them seek buying real estate in countries where ownership is encouraged rather than discouraged and policies are more relaxed.
This means that current domestic real estate investors are realizing a drop in their net worth which has an average of 20% real estate holdings embedded within it. It is not the ideal situation for these investors and they are seeking to put their money elsewhere. In fact, drop in real estate property values accounted for nearly $4 billion in losses to the top holders in China.
Some of the Places of Interest to Chinese Investors
It is no surprise that the United States would be the top overseas market among Chinese real estate investors looking for a bargain. The U.S. along with other western countries having experienced its housing market collapse in the last five years has a glut of property at buyer’s prices. This even includes luxury real estate that one would view as unreachable in New York, Florida, and California. It is a buyer’s market overseas.
Other countries where attractive luxury real estate bargains can be found are Canada, Australia, and the U.K. Specific cities that are considered safe for investment are Vancouver, Hong Kong, and London. Even places that have typically never seen Chinese investment are drawing interest. A couple of examples are Tuscany, Italy and the French Riviera.
What is the Answer?
The answer is to encourage expansion into overseas markets because this is a competitive world. Other markets across the globe are looking to recover from the effects of their property bubbles over the last 5 years and the Chinese investor wants to sink his money into stable investments with the possibility of migrating to a more stable land in terms of property prices and general economic stability. The big picture would level the markets a bit and reduce some of the volatility and could revive the real estate markets in places such as these western nations while at the same time avoiding a property bubble in China.